Industrial Nitrocellulose from Germany; Preliminary Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-428-803]

Industrial Nitrocellulose from Germany; Preliminary Results of

Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of preliminary results of antidumping duty

administrative review of industrial nitrocellulose from Germany.

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SUMMARY: In response to a request from the petitioner, Hercules

Incorporated, the Department of Commerce is conducting an

administrative review of the antidumping duty order on industrial

nitrocellulose from Germany. The period of review is July 1, 1996

through June 30, 1997. This review covers imports of industrial

nitrocellulose from one producer, Wolff Walsrode AG.

We have preliminarily found that sales of subject merchandise have

been made below normal value. If these preliminary results are adopted

in our final results, we will instruct the Customs Service to assess

antidumping duties based on the difference between the export price or

constructed export price and normal value.

Interested parties are invited to comment on these preliminary

results. Parties who submit arguments are requested to submit with the

argument (1) a statement of the issue and (2) a brief summary of the

argument. We will issue the final results not later than 120 days from

the date of publication of this notice.

EFFECTIVE DATE: April 9, 1998.

FOR FURTHER INFORMATION CONTACT:

Todd Peterson or Zev Primor, AD/CVD Enforcement Office 4, Import

Administration, International Trade Administration, U.S. Department of

Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C.

20230; telephone (202) 482-4195, and 482-4114, respectively.

SUPPLEMENTARY INFORMATION:

The Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

references to the provisions effective January 1, 1995, the effective

date of the amendments made to the Tariff Act of 1930 (the Act) by the

Uruguay Round Agreements Act (URAA). In addition, unless otherwise

indicated, all citations to the Department of Commerce's (the

Department's) regulations refer to the regulations codified at 19 CFR

Part 351, (62 FR 27296, May 19, 1997).

Background

On July 10, 1990, the Department published in the Federal Register

(55 FR 28271) the antidumping duty order on industrial nitrocellulose

(INC) from Germany. On July 21, 1997, the Department published in the

Federal Register (62 FR 38973) a notice of opportunity to request an

administrative review of this antidumping duty order. On July 30, 1997,

in accordance with 19 CFR 351.213(b), the petitioner and domestic

producer of the subject merchandise, Hercules Incorporated, requested

that the Department conduct an administrative review of Wolff Walsrode

AG's (WWAG's) imports of subject merchandise to the United States. We

published the notice of initiation of this review on August 28, 1997

(62 FR 45621).

Verification

As provided in section 782(i)(3) of the Act, we verified the data

provided by the respondent using standard verification procedures,

including on-site inspection of the manufacturer's facilities, the

examination of relevant sales and financial records, and selection of

original documentation containing relevant information. Our

verification results are outlined in the public versions of the

verification reports.

Scope of the Review

Imports covered by this review are shipments of INC from Germany.

INC is a dry, white, amorphous synthetic chemical with a nitrogen

content between 10.8 and 12.2 percent, and is produced from the

reaction of cellulose with nitric acid. INC is used as a film-former in

coatings, lacquers, furniture finishes, and printing inks. The scope of

this order does not include explosive grade nitrocellulose, which as a

nitrogen content of greater than 12.2 percent. INC is currently

classified under Harmonized Tariff Schedule (HTS) subheading

3912.20.00. While the HTS item number is provided for convenience and

Customs purposes, the written description remains dispositive as to the

scope of the product coverage. The review period is July 1, 1996

through June 30, 1997.

Product Comparisons

We calculated monthly, weighted-average, normal values (NVs). Where

possible, we compared U.S. sales to sales of identical merchandise in

Germany. When identical merchandise

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was not sold during the relevant contemporaneous period, we compared

U.S. sales to sales of the next most similar foreign like product (see

section 771(16) (B) and (C) of the Act).

Export Price and Constructed Export Price

For sales to the United States, we used export price (EP) or

constructed export price (CEP) as defined in sections 772(a) and 772(b)

of the Act, as appropriate. In accordance with sections 772(a) and (c)

of the Act, we calculated an EP where the merchandise was sold by the

producer outside the United States directly to the first unaffiliated

purchaser in the United States prior to importation. In accordance with

sections 772(b), (c) and (d) of the Act, we calculated a CEP for those

sales made by affiliated U.S. resellers that took place after

importation into the United States. For sales made prior to

importation, we considered the following factors to determine whether

to treat the sales as EP or CEP: (1) Whether the merchandise was

shipped directly from the manufacturer to the unaffiliated U.S.

customer; (2) whether this was the customary commercial channel between

the parties involved; and (3) whether the function of the U.S.

affiliate was limited to that of a processor of sales-related

documentation and a communications link with the unrelated buyer. The

facts indicate that the activities of the U.S. affiliate were ancillary

to these sales (e.g., arranging transportation or customs clearance,

invoicing), and therefore, we treated transactions as EP sales. The

record in this case indicates that WWAG has correctly classified a

portion of its U.S. sales as EP sales. For these sales the unaffiliated

U.S. customer communicated directly with WWAG in Germany in placing its

order. Wolff Walsrode U.S. (WWUS) acted only as processor of sales-

related documentation.

In accordance with sections 782(b), (c) and (d) of the Act, we

calculated a CEP for those sales made by affiliated U.S. resellers that

took place after importation into the United States. EP and CEP sales

were based on the packed C&F, delivered, CIF duty paid, or ex-dock duty

paid price to unaffiliated purchasers, in, or for exportation to, the

United States. As appropriate, we made deductions for discounts and

rebates, including early payment discounts. We made deductions for

movement expenses in accordance with section 772(c)(2)(A) of the Act;

these included foreign inland freight, foreign brokerage and handling,

ocean freight, marine insurance, U.S. customs brokerage, U.S. customs

duties, harbor maintenance fees, merchandise processing fees, and U.S.

inland freight expenses (freight from port to warehouse and freight

from warehouse to the customer). We also added U.S. freight revenue to

gross unit price.

For CEP sales, in accordance with section 772(d)(1) of the Act, we

deducted those selling expenses associated with economic activities

occurring in the United States, including commissions paid on sales

made by unrelated parties, direct selling expenses (credit costs and

warranty expenses), inventory carrying costs, and indirect selling

expenses, where applicable. We also deducted an amount for CEP profit

in accordance with section 772(d)(3) of the Act.

Normal Value

We compared the aggregate quantity of home market and U.S. sales

and determined that the quantity of the company's sales in its home

market was more than five percent of the quantity of its sales to the

U.S. market. Consequently, pursuant to section 773(a)(1)(B) of the Act,

we based NV on home market sales.

Section 773(a)(1)(B) of the Act provides that normal value shall be

based on the price at which the foreign like product is sold in the

usual commercial quantities and in the ordinary course of trade.

We made adjustments for differences in packing in accordance with

section 773(a)(6)(A) and 773(a)(6)B(i) of the Act. We also made

adjustments for movement expenses, consistent with section 773(a)(6)(B)

of the Act, for inland freight. In addition, we made adjustments for

differences in cost attributable to differences in physical

characteristics of the merchandise pursuant to section 773(a)(6)(C)(ii)

of the Act, as well as for differences in circumstances of sale (COS)

in accordance with section 773(a)(6)(C)(iii) of the Act and 19 CFR

351.410. For comparisons to EP, we made COS adjustments by deducting

direct selling expenses incurred on home market sales and adding U.S.

direct selling expenses. For comparisons to CEP, we made COS

adjustments by deducting direct selling expenses incurred on home

market sales and adding any direct selling expenses associated with

U.S. sales not deducted under the provisions of section 772(d)(1) of

the Act. Because WWAG paid commissions on part of its U.S. sales, in

calculating NV, we offset these commissions using the weighted-average

amount of indirect selling expenses incurred on home market sales for

the comparison product, up to the amount of the U.S. commissions. See

19 CFR 351.410(e).

Level of Trade/CEP Offset

In accordance with section 773(a)(1)(B) of the Act, to the extent

practicable, we determine NV based on sales in the comparison market at

the same level of trade as the EP or CEP sales. The NV level of trade

is that of the starting-price sales in the comparison market or, when

NV is based on CV, that of the sales from which we derive selling,

general and administrative expenses (SG&A) and profit. For EP, the

level of trade is also the level of the starting-price sale, which is

usually from exporter to importer. For CEP, it is the level of the

construction sale from the exporter to the importer.

To determine whether NV sales are at a different level of trade

than EP or CEP, we examine stages in the marketing process and selling

functions along the chain of distribution between the producer and the

unaffiliated customer. If the comparison-market sales are at a

different level of trade, and the difference affects price

comparability, as manifested in a pattern of consistent price

differences between the sales on which NV is based and comparison-

market sales at the level of trade of the export transaction, we make a

level of trade adjustment under section 773(a)(7)(A) of the Act.

Finally, for CEP sales, if the NV level is more remote from the factory

than the CEP level and there is no basis for determining whether the

difference in the levels between NV and CEP affects price

comparability, we adjust NV under section 773(a)(7)(B) of the Act (the

CEP offset provision). See Notice of Final Determination of Sales at

Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from

South Africa, 62 FR 61731 (November 19, 1997).

In the present case, there are two channels of distribution in the

U.S. market. The first channel, direct (EP) sales, are sales of full

container load shipments that travel directly from WWAG to the U.S.

customer. The second channel involves (CEP) sales from inventory

maintained by WWUS in a warehouse.

In the home market, WWAG also has two different distribution

channels. The first type of sales are direct sales to primarily end-

users where the product is delivered from the plant's storage warehouse

to customer. The second home market distribution channel are those

sales where delivery is made from independent, off-site warehouses,

primarily for geographic and logistical reasons. There are no

functional differences in marketing processes and

[[Page 17366]]

selling functions along the chain of distribution between those sales

shipped directly from the plant and sales from the warehouse.

Therefore, we determine that the two home market channels of

distribution comprise a single level of trade.

Based on analysis of the different types of selling functions

listed by respondent, relevant classes of customers, and selling

expenses for both types of sales in the home and U.S. markets, the

Department preliminarily determines that EP sales and home market sales

are made at the same level of trade. For these sales, WWAG performs

similar selling functions in both markets. However, the Department

preliminarily determines that CEP sales are made at a different level

of trade than EP sales and the home market sales.

In calculating CEP, certain adjustments are made pursuant to

Section 772(c) and (d) of the Act. Specifically, Section 772(d) states

that the price used to establish constructed export price are adjusted

to remove expenses incurred by WWAG and WWUS in selling subject

merchandise in the United States including inventory management,

freight arrangements, and invoice processing to name a few. Therefore,

when selling functions for CEP sales are compared with selling

functions for home market sales, home market sales (NV) are more remote

from factory than CEP sales (i.e., that NV is at a more advance level

of trade than CEP). Therefore a level of trade adjustment is warranted

when comparing NV to CEP sales.

Section 773(a)(7)(B) states that a CEP offset is granted when NV is

compared to CEP and NV is determined to be at a more advanced level of

trade than the CEP, but the data available do not provide an

appropriate basis to determine whether the difference in level of trade

affects price comparability. See 19 CFR 351.412(f).

In the present case, as there is no level in the home market

comparable to the CEP level and only one level of trade in the home

market, the data does not exist to quantity a level of trade

adjustment. As a result, the Department has preliminarily determined to

grant WWAG an adjustment to NV in the form of a CEP offset.

Currency Conversion

We made currency conversions in accordance with section 773A of the

Act based on the rates certified by the Federal Reserve Bank. See

Change in Policy Regarding Currency Conversions, 61 FR 9434 (March 8,

1996).

Preliminary Results of the Review

As a result of this review, we preliminarily determine that the

following margin exists for the period July 1, 1996, through June 30,

1997:

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Margin

Manufacturer/exporter (percent)

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Wolff Walsrode AG (WWAG).................................... 6.58

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Parties to the proceeding may request disclosure within five days

of the date of publication of this notice. Interested parties may also

request a hearing within ten days of publication. If requested, a

hearing will be held as early as convenient for the parties but not

later than 44 days after the date of publication or the first work day

thereafter. Interested parties may submit case briefs not later than 30

days after the date of publication of this notice. Rebuttal briefs,

which must be limited to issues raised in the case briefs, may be filed

not later than 37 days after the date of publication of this notice.

The Department will issue a notice of the final results of this

administrative review, which will include the results of its analysis

of issues raised in any such briefs, within 120 days from the

publication of these preliminary results.

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. In accordance

with the methodology in Final Results of Antidumping Duty

Administrative Review and Partial Termination of Administrative Review:

Circular Welded Non-Alloy Steel Pipe from the Republic of Korea (62 FR

55574, October 27, 1997), we calculated exporter/importer-specific

assessment values by dividing the total dumping duties due for each

importer by the number of tons used to determine the duties due. We

will direct Customs to assess the resulting per-ton dollar amount

against each ton of the merchandise entered by these importers during

the review period.

Furthermore, the following deposit requirements will be effective

upon completion of the final results of this administrative review for

all shipments of industrial nitrocellulose from Germany entered, or

withdrawn from warehouse, for consumption on or after the publication

date of the final results of this administrative review, as provided by

section 751(a)(1) of the Act: (1) The case deposit rate for the

reviewed company will be the rate established in the final results of

this administrative review (except no cash deposit will be required

where weighted-average margin is de minimis, i.e., less than 0.5

percent); (2) for merchandise exported by manufacturers or exporters

not covered in this review but covered in the original less-than-fair-

value (LTFV) investigation or a previous review, the cash deposit will

continue to be the most recent rate published in the final

determination or final results for which the manufacturer or exporter

received an individual rate; (3) if the exporter is not a firm covered

in this review, a previous review, or the original investigation, but

the manufacturer is, the cash deposit rate will be the rate established

for the most recent period for the manufacturer of the merchandise; and

(4) if neither the exporter nor the manufacturer is a firm covered in

this or any previous reviews or the original investigation, the cash

deposit rate will be 3.84 percent, the ``all others'' rate established

in the LTFV investigation.

This notice serves as a preliminary reminder to importers of their

responsibility to file a certificate regarding the reimbursement of

antidumping duties prior to liquidation of the relevant entries during

this review period. Failure to comply with this requirement could

result in the Secretary's presumption that reimbursement of antidumping

duties occurred and the subsequent assessment of double antidumping

duties.

This administrative review and notice are in accordance with

sections 751(a)(1) and 777(i)(1) of the Act.

Dated: April 2, 1998.

Joseph A. Spetrini,

Acting Assistant Secretary, Import Administration.

[FR Doc. 98-9432 Filed 4-8-98; 8:45 am]

BILLING CODE 3510-DS-M